RETHINKING PUBLIC WORKER PAY HIKES

Carlsbad’s shift to merit raises may be explored by others as way to rein in costs

The approximate total increase in California state worker compensation costs since 2006-07

Sacramento 
San Diego County was at the vanguard of public pension dial-backs that swept California last year. Now, Carlsbad’s decision to do away with automatic pay increases for government employees as they accumulate years of service could put the county at the forefront of a new wave.

Public employee contracts often make news when disputes arise about “across the board” raises, which boost pay scales top to bottom. Lesser publicized are the automatic “step increases” that generally accrue to employees as they serve time on the job.

In a deal with unions, Carlsbad has put a stop to that, opting to spend the same amount of money on merit increases instead.

“When I hear that employees will get raises based on performance, I say, ‘Welcome to the real world,’ ” said Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association. “It would be nice if other cities around the state followed suit.”

Leaders of some cities believe embracing a similar pay system could be the answer as they look to rein in costs and recover from the economic downturn. Unions are viewing any attacks on egalitarian pay with suspicion.

“It’s going to be interesting to see what happens with other agencies,” said Chris Burdick, a retired public-sector union negotiator in Northern California and now an arbitrator in Marin County. “The unions will fight like wounded tigers to avoid the spread of this.”

Much like pensions, which were once available to employees of many sectors but have become a government phenomenon, the step increases are an obscure but standard perk enjoyed primarily by public employees.

Any broad campaign to ax automatic raises is sure to face stiff opposition, much like San Jose and San Diego faced last year in their battles to curb lifetime pension benefits awarded to public employees in the days when the state seemed flush with cash.

Steven Kreisberg, national collective bargaining director for the American Federation of State, County and Municipal Employees, said the demoralizing aspects of a so-called merit system outweigh any motivations. Supervisors don’t spend enough time to accurately gauge performance, Kreisberg said, and the measurement instruments relied upon by agencies are often not valid.

“Managers hate it because it’s a zero sum game,” he said of dividing up a merit-pay pool. “They can’t give everyone the ratings they deserve.”

Kreisberg declined to predict whether Carlsbad’s innovation would become a trend among municipalities in California.

Critics of the automatic pay hikes have characterized them as hidden. Unlike across-the-board raises, governments rarely mention when their employees receive hikes based on years of service. Despite years of belt-tightening, employee costs have continued to grow in part because of the built-in raises.

Carlsbad’s actions appear to be rare, if not unprecedented, in the state. A spokeswoman for the League of California Cities said she has yet to hear of another city making such a move.

Lawrence McQuillan, a senior fellow at the libertarian Independent Institute in Oakland, said it would take a handful of local governments of varying sizes moving away from step increases to assess the potential for meaningful budget savings over the years.

“I see this as a way of thinking creatively by officials in terms of how we can incentivize productivity increases on the part of our employees — and reward them for that — and at the same time save some money in the budget,” McQuillan said, adding that the financial environment remains conducive to local agencies adopting resourceful approaches. “I don’t think the public would be necessarily opposed to salary increases if the officials could then justify it as a cost savings.”

David Ott, the city manager of Solana Beach, said he was enthusiastic about Carlsbad’s move because leaders in his city support the concept of paying employees based on performance.

Leaders in other San Diego County cities expressed skepticism.

“Sometimes management has favorites, and if they keep getting big raises it could frustrate other employees,” El Cajon Mayor Mark Lewis said. “I don’t want to be in a position where we hand out raises based on how high the employee jumps.”

Lewis also said he was worried basing raises on performance would encourage workers to explore projects outside of their job description to make an impression.

“I think you’d be in danger of encouraging too much showmanship,” he said.

Randy Voepel, mayor of Santee, said step increases reward loyal employees and help workers keep up with inflation.

The head of the teachers union for the San Diego Unified School District said he doubted automatic pay raises would be eliminated for teachers anywhere in the state.

“This would run educators away from our neediest students, because if you’re getting paid for test scores, you’ll want to teach the brightest kids,” said Bill Freeman, president of the San Diego Education Association. “It’s been proven that performance pay is detrimental to teachers.”

Barry Broad, a labor union lobbyist in Sacramento, noted that the civil service system was established as an attempt to get around political patronage jobs and reduce activities such as cronyism and bribery.

“You could wind up back with Tammany Hall,” Broad said. “I by no means am suggesting that everything is perfect about public employment, but sometimes you get more with honey than with vinegar in life when you are dealing with human beings. They are much more motivated by praise and raises.”

Even in Carlsbad, the new policy only applies to half the city’s workforce. Firefighters and police officers are excluded. Mayor Matt Hall said he hoped to roll them into the new system within a few years.

In a typical step-increase setup, an employee might be guaranteed 3 percent raises at four years, eight years and 12 years after they get hired. Those hikes are in addition to any other pay raises negotiated by the employee’s labor union.

While switching from that to a performance-based system might sound novel, similar government efforts to contain costs have been around for some time and in some cases have existed under the radar, said Frank Zerunyan, a senior fellow and director of Executive Education at the University of Southern California Sol Price School of Public Policy.

For decades cities have contracted for services with other governments as well as the private sector. In Rolling Hills Estates, where Zerunyan is the mayor, city employees don’t collect trash, perform traffic engineering or review environmental documents for projects.

“Many people are looking at this today and saying, ‘Oh, my God. I’ve never seen this before,’ ” Zerunyan said. “That’s not true. It’s just that it has not necessarily been within our own ranks.”

Still, he noted that the motivation and intention of government and business is different.

“Business can be so efficient because everything is about the dollar,” he said. “Our profit is when I see that smiling kid on a swing set in the park or using a horse rink that we have in the city.”